Will U.S. soon reach natural gas storage capacity?

If forecasters are correct, the United States should run out of natural gas storage space by October – a short 5 months away. Thanks to the natural gas rush on the Eastern coast in the Marcellus shale, an unseasonably warm winter – and a mild summer predicted, there’s little chance for producers to unload some of that glut without further dropping the already low price of natural gas in the market.

A few weeks ago the Wall Street Journal ran an article predicting this gas storage problem. Chesapeake Energy has already determined it will be curbing production, (Big surprise move, right? thanks to Aubrey McClendon), following a trend producers are seeing across the country with natural gas drilling rig counts down nearly 20 percent already this year.

According to the Department of Energy, 120 gas storage operators maintain about 400 underground facilities made up of aquifers, depleted oil and gas reservoirs and salt caverns with a working gas capacity of nearly 4 trillion cubic feet. These storage facilities are mostly heavily concentrated near major eastern and mid-America markets, with some in Texas, Oklahoma, California, Colorado and surrounding areas.

Not only are we running out of space to store the gas glut, but nearly 25 percent of the existing pipelines used to deliver gas across the country are more than 50 years old. In 2004, it was projected that nearly $19 billion of investment would be needed to replace the current pipe simply to maintain existing capacity. That was before the Marcellus shale became a household name. Nearly $42 billion was estimated to be needed for new pipeline and storage projects on top of that.

Naysayers argue that the U.S. will never actually run out of natural gas storage, and data – while slightly outdated from the U.S. Energy Information Administration suggests that to be true. According to whom you talk to, and more importantly, what numbers and equations you use, you can get entirely different numbers for what “percent” full we are today. Back in 2003, with the data the U.S. Department of Energy used, that percentage ranged from 79 to 95 percent full with calculations differing based on the equation, not numbers used.

So which is it? Are forecasters merely presenting a doomsday approach to the natural gas market, much like we producers already see and feel? Or is there something to the idea that the market will soon be so saturated that space will run out?